CIT Vs Sheraton International LLC (Delhi High Court)
Delhi High Court has dismissed an appeal filed by the Commissioner of Income Tax (CIT) against Sheraton International LLC concerning the assessment year 2013-14. The appeal challenged a ruling by the Income Tax Appellate Tribunal (Tribunal) which held that the “centralized fee” earned by Sheraton International LLC was not taxable under Indian tax laws.
The centralized fee in question pertained to various services provided by Sheraton, including sales and marketing charges, loyalty programs, reservation charges, technological services, operational services, and training programs related to human resources.
The Tribunal, in its order dated September 23, 2022, had relied on a precedent set by a coordinate bench of the Delhi High Court in the case of Director of Income Tax v. Sheraton International Inc (2009) 178 taxman 84 (Del). In that case, the High Court had ruled on a similar issue in favor of Sheraton International Inc., holding that such centralized fees were not taxable.
Furthermore, the Tribunal noted that in previous assessment years concerning Sheraton International LLC itself, a coordinate bench had consistently followed the ratio laid down in the Sheraton International Inc. judgment. This consistent application of the precedent formed the basis of the Tribunal’s decision in the present case.
Considering the existing judicial precedent established by its own coordinate bench and the consistent application of this precedent in the assessee’s own cases for other assessment years, the High Court, in the present appeal, stated that no substantial question of law arose for its consideration. Consequently, the court dismissed the revenue’s appeal.
However, the High Court made a specific clarification in its order. It noted that the revenue had preferred an appeal against the judgment rendered by the Division Bench of the High Court in the Sheraton International Inc. case. In light of this pending appeal, the court explicitly stated that if the revenue were to succeed in that matter before the Supreme Court, all parties involved in the present case would be bound by the final decision rendered by the apex court.
Initially, the revenue had filed an application seeking condonation of a 45-day delay in re-filing the appeal. Mr. Divyanshu Agrawal, representing the respondent/assessee, did not oppose this prayer. Consequently, the High Court condoned the delay and disposed of the application accordingly before proceeding to the merits of the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
